Presidential Pardon for Binance Founder Sparks Debate Over Crypto AML Enforcement

The unexpected presidential pardon of Changpeng Zhao, founder of Binance and one of the most prominent figures in the global cryptocurrency industry, has reignited discussions on financial crime accountability and the politicization of anti-money-laundering enforcement. The news was first reported by the Wall Street Journal. Zhao’s release comes less than a year after he served a federal prison sentence following one of the largest corporate money-laundering convictions in U.S. history. The case, which centered on systemic failures in Binance’s AML controls, continues to represent one of the most defining compliance breaches in the evolution of the cryptocurrency sector.

Binance, launched in 2017, rapidly grew into the world’s leading cryptocurrency exchange by trading volume. Its business model prioritized speed, accessibility, and global reach. However, regulators quickly took notice. Between 2018 and 2023, U.S. authorities determined that Binance had facilitated billions of dollars in transactions without implementing effective anti-money-laundering measures as mandated under the Bank Secrecy Act and related federal statutes. Prosecutors found that Binance allowed customers worldwide, including in sanctioned jurisdictions, to trade cryptocurrencies anonymously. This lack of robust Know-Your-Customer processes enabled criminals to convert illicit funds into digital assets, effectively laundering proceeds from ransomware, narcotics, and cyber-fraud operations. The Department of Justice concluded that Binance had failed to register as a money-transmitting business and had deliberately circumvented internal controls to maintain user growth.

In late 2023, Binance and Zhao pleaded guilty to failing to maintain an effective AML program. The company paid an unprecedented USD 4.3 billion fine, while Zhao personally paid USD 50 million and stepped down as CEO. He was sentenced to four months in prison, a term seen by some as lenient given the magnitude of violations. The DOJ emphasized that the exchange had effectively become a gateway for illicit capital flows and that leadership bore personal responsibility for undermining AML safeguards essential to the global financial system.

The plea agreement imposed a five-year compliance monitorship on Binance, with direct oversight from U.S. authorities. FinCEN and OFAC were tasked with supervising the firm’s adherence to AML and sanctions obligations, a structure that mirrored the toughest resolutions applied to traditional banks and confirmed that crypto firms operating in U.S. markets would face equivalent enforcement standards.

The October 2025 pardon marked a sudden reversal. Former president Donald Trump, recently returned to office and branding himself the “crypto president,” exercised his constitutional authority to absolve Zhao of his conviction. The pardon erased the criminal record linked to Binance’s money-laundering violations, despite the DOJ’s extensive findings. Trump’s administration framed the move as a corrective response to what it described as a “war on cryptocurrency” by the previous government, positioning the pardon as a gesture to encourage innovation. The decision, however, has reignited controversy within legal and financial circles, with compliance experts and law enforcement officials warning that it undermines years of progress in holding high-profile financial actors accountable for systemic AML failures.

The pardon follows a broader trend. Earlier in 2025, Trump pardoned the three co-founders of BitMEX, who had pleaded guilty to failing to implement an AML program, and Ross Ulbricht, the creator of the Silk Road dark-web marketplace, whose platform facilitated large-scale narcotics and money-laundering operations. Observers note that these actions collectively suggest a softer approach toward crypto-related financial crime and a potential rollback of the regulatory rigor established since the late 2010s.

While a presidential pardon removes criminal liability, it does not alter the factual record of wrongdoing. Binance remains under a U.S. monitorship, responsible for reforms to its transaction monitoring, sanctions screening, and customer verification systems. Nevertheless, the optics of Zhao’s pardon—coupled with the administration’s pro-crypto messaging—have raised doubts about the future consistency of AML enforcement in digital finance.

Regulatory findings against Binance exposed structural weaknesses that serve as cautionary lessons for financial institutions. The first and most significant was the company’s prioritization of growth over compliance. Binance’s leadership created a culture viewing regulatory frameworks as obstacles rather than safeguards. Compliance staff were under-resourced, controls were fragmented, and decision-making authority rested with executives incentivized by trading volumes rather than risk mitigation.

Second, the company’s customer onboarding process was insufficient. Binance allowed users to register with minimal identification, often accepting unverifiable documents or permitting multiple accounts, directly contravening KYC requirements under the BSA and FATF guidance.

Third, Binance’s transaction-monitoring systems were inadequate to detect suspicious activity in real time. Investigations revealed transactions involving sanctioned jurisdictions, including Iran, Russia, and Syria, some linked to terrorist financing and ransomware groups already designated by OFAC. Alerts were frequently missed, dismissed, or never generated.

Fourth, Binance deliberately concealed its U.S. customer base. Internal communications revealed that the company sought to “avoid regulatory triggers” by routing transactions through offshore entities, creating opacity and hindering traceability, which is fundamental to AML compliance.

Finally, governance failures reflected a lack of top-level accountability. Unlike banks with board-approved compliance frameworks, Binance centralized risk management under Zhao. His guilty plea confirmed that personal culpability in AML governance extends to founders and executives—a precedent with far-reaching implications for crypto-asset service providers.

The case underscores several lessons for AML professionals and regulators. First, enforcement in the digital-asset space has matured, with penalties and personal liability demonstrating that crypto entities cannot operate outside regulatory oversight. This aligns with FATF’s emphasis on applying risk-based approaches to virtual-asset service providers.

Second, political interference in enforcement carries risks. Pardoning individuals convicted of severe compliance breaches can weaken deterrence, create perceptions of regulatory inconsistency, and discourage investment in AML infrastructure, potentially affecting international cooperation.

Third, AML, sanctions, and cybersecurity oversight are increasingly interconnected. Weak sanctions screening often signals AML gaps, both of which pose national-security risks.

Fourth, compliance programs must evolve from procedural checklists to proactive, data-driven systems. Digital-asset platforms require blockchain analytics, wallet clustering, and behavioral pattern recognition. The Binance case illustrates that traditional controls alone cannot mitigate modern risks without advanced monitoring and clear escalation procedures.

Finally, long-term remediation remains essential. Despite the pardon, Binance’s monitorship is legally binding. The company must demonstrate measurable improvements in AML governance, reporting accuracy, and internal culture. For the compliance community, this reinforces that reputational recovery following a financial-crime case depends not on political intervention but on demonstrable institutional reform.

By fLEXI tEAM